I think the heart of the problem is in your layout. There is something in your layout that is causing the overlap that I cannot see.
if I create a new layout Using what I think you selected:
and change only the width of the level one menu's to 100px, I am not able to reproduce the problem that you are experiencing.
If you can walk me through all of the exact changes you made to the BEA Layout, then maybe I could find the problem, but not being able to create a layout that exhibits the same issue, I am at a loss.
can you try creating a new layout where the only change that is made is changing the width of the level one menus?